According to several media reports, the leader of Germany's Social Democratic Party (SDP) Martin Schulz said he will not stand in the way of his party forming a "grand coalition" with Merkel's conservatives, signalling a potential end to a lengthy deadlock over the formation of a new German government.

Schulz had previously ruled out entering into another "grand coalition" with Merkel after his party suffered its worst ever result in the federal elections in September.

Welcoming the prospect of talks with her former partner, Merkel defended the record of the last coalition.

"We worked well together," she said, adding under the grand coalition, Germany enjoyed the strongest labor market for decades, a balanced budget and pensioners and families had benefited, she argued.

German politics has been plunged into several days of uncertainty following the collapse of the talks, which broke down over issues related to the refugee crisis and environmental policies.

It is not yet clear whether the SPD will enter into a new coalition with Mrs Merkel, or whether it will only offer to prop up a minority government from the outside, the report said.

If Merkel can't put together a coalition, the only options would be a minority government or a new election, months after the September 24 vote. (ANI)